Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Investment horror story: how ‘Silence of the Financial Advisers’ could make them a killing

The Silence of the Lambs was a fictional horror story but investors could be in for a real shock next year from The Silence of Financial Advisers'

More than 20 years after the thriller The Silence of the Lambs scared the pants off a generation, there will soon be a new reason to be afraid of what you don’t hear. Let me be first to warn you about “The Silence of the Financial Advisers”.

You might think that no news is good news from those sometimes irritatingly persistent men or women who used to telephone or visit regularly to try to sell you individual savings accounts (Isas), pensions and other financial services. Next year, however, many will mysteriously fail to do so – despite the final months of the tax year, which ends on April 5, traditionally being peak selling season for Isas and retirement funds.

A wider problem may arise from banning all forms of commission payments to financial advisers from the end of this year. Yes, there will be less bad advice based on commission payments, which made some investments a better deal for advisers than investors. But there will probably also be less financial advice available generally.

That would be a bad thing for society as a whole because all the evidence suggests that most financial services are sold rather than bought. Put another way, few people jump out of bed in the morning determined to top up their retirement fund.

Nor is that surprising when all of the other advertising and marketing to which we are subjected promises instant gratification (buy the drink and get the girl, take a holiday and escape the rat race, drive the car and join the smart set etc etc). By contrast, financial services are all about deferred gratification, a much more difficult sell.

For example, pension providers are still just about allowed to suggest that if you let them lock your money up for several decades you might eventually be glad you did so – but then they are compelled to warn that you might get back less than you invest, the past is not a guide to the future, etc.

So the much maligned financial adviser plays a valuable role in helping many make the difficult transition from merely worrying about the future for themselves and their families to actually doing something about it. Less financial advice is likely to mean less saving and investing and less insurance.

At the risk of stating the bleedin’ obvious, failing to save or invest will not prevent people from continuing to grow old. Nor will failing to insure prevent fathers and mothers from suffering tragic mishaps, such as stepping in front of the proverbial bus.

Back then, many life companies used salesmen and women – often housewives earning pin money on commission – to hawk savings and protection products door to door. Without putting too fine a point on it, this included those parts of town where the postman now fears to tread and police prefer to travel in pairs.

Small ticket business with high distribution costs was never going to produce the best value deals, but it did mean that many people of modest means had some savings and insurance against a rainy day. Now that the Man from the Pru or the Pearl and many others like them have been driven out of business, nobody knocks on those doors to sell savings and insurance.

Instead, these families are now much more likely to be sold lottery tickets or usurious payday loans. It is difficult to see how that can be described as progress. Which would you rather have, a small pot of savings and life assurance or a lottery ticket which did not win and a debt you cannot afford?

Let’s hope less advice does not mean less financial prudence further up the income scale. What’s certain is that more of us will have to take more responsibility for arranging adequate savings, investment and insurance. And the first question for many DIY investors next spring should be: why has my old adviser stopped calling, and is there good reason to fear the sound of silence?